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US Inflation Creeps Higher

Consumer prices gained 0.2% in August from a month earlier.Consumer prices gained 0.2% in August from a month earlier.

Consumer price inflation rose more than expected in August, increasing pressure from the Federal Reserve to tighten monetary policy, official data showed on Friday.

In a report, the US Commerce Department said that consumer prices gained 0.2% in August from a month earlier, compared to expectations for a 0.1% gain and a flat reading in the previous month, Investing.com reported. Year-over-year, consumer prices increased 1.1%, above expectations for a gain of 1.0% and after having risen 0.8% in July.

Consumer prices, excluding food and energy costs, increased by a seasonally adjusted 0.3% last month, above forecasts for a 0.2% rise and compared to the 0.1% advance seen in July.

Core CPI increased at annualized rate of 2.3% in August, above prior month’s reading and the consensus forecast of 2.2%. Core prices are viewed by the Federal Reserve as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories. The central bank usually tries to aim for 2% core inflation or less.

After the report, the dollar strengthened. EUR/USD was trading at 1.120 from around 1.122 ahead of the release of the data, GBP/USD was at 1.315 from 1.317 earlier, while USD/JPY was at 102.07 from 101.87 earlier.

The US dollar index, which tracks the greenback against a basket of six major rivals, was at 95.62, compared to 95.48 ahead of the report.

Meanwhile, US stock futures pointed to a lower open. The Dow futures fell 65 points, or 0.36%, the S&P 500 futures lost 8 points, or 0.39%, while the Nasdaq 100 futures traded down 15 points, or 0.30%.

Elsewhere, in the commodities market, gold futures traded at $1,314.15 a troy ounce, compared to $1,316.85 ahead of the data, while crude oil traded at $43.07 a barrel from $43.19 earlier. Analysts said that the better-than-expected inflation data would not be enough to prompt US Federal Reserve chair Janet Yellen and company to increase borrowing costs.

"Today's data is unlikely to persuade Yellen to pull the trigger on an interest rate hike just yet," Dennis de Jong, managing director at UFX.com, said. "Analysts had speculated next week's Fed meeting could bring with it a rate increase, but a mixed bag of recent financial data could instead see Yellen and co. err on the side of caution."

"While there are reasons to be optimistic for the prospects of the US economy, a global backdrop of uncertainty paired with a contentious presidential race means we may have to wait until December for any movement for the Fed."

 

Financialtribune.com